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Pan African Resources is reviewing its cost base and "strategic merits" of its portfolio

Production guidance for fiscal 2018 (to end-June) was reduced to 177,000-181,000 ounces from 190,000 ounces previously
Gold pour
"We expect to deliver improved production results and cost savings in the next reporting period," said CEO, Cobus Loots

Dual-listed Pan African Resources PLC (LON:PAF) hailed the improved operational and financial performance of its Evander Mines division in the second half of 2017.

Evander returned to profitability as a result of the remedial action taken to address the critical shaft infrastructure and the cost base of the operation.

READ: Pan African in exclusive talks to buy assets of ASA Resource

Evander’s underground gold operations delivered an improved performance, with gold sold increasing to 32,734 ounces (oz) from 26,477 oz in the second half of 2016.

Pan African said the improvement was due to tonnages milled from underground mining increasing by 7.6% to 174,233 tonnes (t) from 161,872t, with the head grade increasing by 13.0% to 6.1 grams per tonne (g/t) from 5.4g/t the year before.

Gold production at the Evander Tailings Retreatment Plant (ETRP) reduced to 11,937 oz (2016: 15,924 oz). Compared to the previous six-month reporting period, the ETRP treated more surface feedstock tonnages with additional milling capacity allocated for surface material due to the 7 Shaft infrastructure repairs during October 2016 and the resultant reduced production from underground.

Barberton Mines sees decline in gold production

At the Barberton Mines division, gold production declined to 40,611 oz from 49,212 oz in the corresponding period of 2016.

Gold production at the Barberton Tailings Retreatment Plant (BTRP) fell to 8,452 oz from 14,741 oz the year before, due to the re-mining operation moving to the lower-grade Harper dump and the head grade reducing from 2.2 g/t to 1.4 g/t.

The Harper dump material has a larger coarse fraction, which resulted in processing problems and a reduction in plant recoveries to 41% (2016: 55%). A regrind mill is being installed to assist with improving recoveries from treating the Harper dump material.

Barberton Mines’ underground mining production reduced to 32,159 oz (2016: 34,471oz) due to a lack of grade flexibility in the Fairview MRC orebody, which curtailed the mineable tonnes at the targeted head grade.

The underground tonnes milled increased to 124,969 tonnes (2016: 123,168 t), while the head grade reduced to 8.7 g/t (2016: 9.4 g/t).

Gold production was adversely affected by disruptions from pressure groups, community unrest and protected and unprotected strike action at Barberton Mines, which resulted in 11 lost production days, equivalent to roughly 3,000 oz of gold.

Elikhulu tailings retreatment project remains ahead of schedule

“The source of the frustration from these stakeholders is driven by issues unrelated to the mine and is symptomatic of the general dissatisfaction with service delivery, inter-union conflict, and unemployment – issues that currently characterise the South African mining and other sectors,” the company said in its trading statement on Thursday.

The Elikhulu tailings retreatment plant project remains on track for commissioning early in the 2019 financial year, ahead of schedule and below budget.

The group said its production guidance for the 2018 financial year will now be 177,000 oz to 181,000 oz, down from 190,000 oz previously.

READ: Pan African Resources restructures black economic empowerment arrangements

“The past 12 months have been a watershed period, during which we reassessed the sustainability of all our operations and dealt with the issues causing operational disruptions. While we still have some work to do, we are confident our operations are being positioned to deliver into our objective of mining relatively low-cost, high-margin and sustainable gold ounces,” said Cobus Loots, the chief executive officer of Pan African.

“In light of the prevailing low ZAR [South African rand] gold price, the group is reviewing its cost base and the strategic merits of our portfolio. We expect to deliver improved production results and cost savings in the next reporting period,” Loots added.

“In terms of medium- to long-term gold production growth, we believe feasibility studies for the Royal Sheba Project at Barberton Mines, and Evander Mines’ Egoli Project (previously called the 2010 Pay Channel), will demonstrate robust economic returns in a relatively low risk mining environment,” Loots concluded.

Shares in Pan African were down 1.57p at 11.19p in mid-morning trading.

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